Navigating the Virtual Financial Ecosystem: VASPs in the Realm of ICOs

The surge in digital assets has given rise to innovative financing mechanisms, with Initial Coin Offerings (ICOs) at the forefront. In this dynamic landscape, the Financial Action Task Force (FATF) defines Virtual Asset Service Providers (VASPs) to encompass entities participating in or providing financial services related to ICOs.

This article explores the intricacies of VASPs in the context of ICOs, shedding light on their roles and regulatory considerations.

Unpacking Limb (v): Participation in ICOs and Financial Services Provision:

Limb (v) of the VASP definition specifically targets entities participating in or providing financial services related to issuers’ offer and/or sale of virtual assets through activities like ICOs. This includes a spectrum of services, from accepting purchase orders and funds to reselling and distributing virtual assets. Entities engaging in book building, underwriting, market making, and placement agent activities fall within the purview of this definition.

Clarifying the Role of Issuing a Virtual Asset:

While the act of issuing a virtual asset alone is not a covered service under limb (v), any entity conducting the exchange and transfer of issued virtual assets as a business for or on behalf of another person qualifies as a VASP. The focus remains on entities actively providing covered functions as a business, beyond the sole act of issuance.

AML/CFT Obligations and Regulatory Landscape:

Jurisdictions’ applicable Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) obligations play a crucial role in governing service providers involved in ICOs. These obligations encompass a range of regulatory frameworks, including those related to money transmission, securities, commodities, and derivatives activities. Regulatory authorities must consider the multifaceted nature of financial services associated with ICOs.

Characteristics of ICOs – An Example:

ICOs involve the sale of digital assets for fiat currency or another virtual asset, often accompanied by a white paper detailing the project. Post-issuance, digital assets may be traded on secondary markets through Virtual Asset Service Providers (VASPs).

Facts and Circumstances Over Labels:

The application of VASP definitions to entities involved in ICOs depends on the underlying facts and circumstances rather than labels or terminology. The example in Box 2 highlights scenarios where the issuer may engage in VASP activities, such as exchanging virtual assets for fiat currency, providing liquidity, or conducting other covered functions. Regulatory frameworks may vary, considering the unique characteristics of each ICO.


As ICOs continue to shape the digital financial landscape, the role of VASPs gains prominence. Regulatory authorities worldwide must adapt to the evolving nature of financial services associated with ICOs, ensuring that the application of VASP definitions remains dynamic and responsive to the complexities of the digital asset ecosystem. Striking a balance between innovation and regulation will be crucial in fostering a secure and transparent virtual financial environment.